Primara Corporation has a standard cost system in which it applies overhead to products based on the standard direct labor-hours allowed for the actual output of the period. Data concerning the most recent year appear below. Total budgeted fixed overhead cost for the year Actual fixed overhead cost for the year Budgeted direct labor-hours (denominator level of activity) Actual direct labor-hours Standard direct labor-hours allowed for the actual output Required: 1. Compute the fixed portion of the predetermined overhead rate for the year. (Round Fixed portion of the predetermined overhead rate to 2 decimal places.) Answer is complete but not entirely correct. $ 2.64 per DLH $ (8,100) U 156,900 F 2. Compute the fixed overhead budget variance and volume variance. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance.). Input all amounts as positive values.) 1. Fixed portion of the predetermined overhead rate 2. Budget variance 2. Volume variance $ 433,100 $ 425,000 $ 61,000 62,000 59,000 **

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Variance Analysis

In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance. 

Standard Costing

The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.